HomeMy WebLinkAbout07/06/1993, C-4 - AMENDMENT NO. 1 TO THE AGREEMENT FOR SALE OF WATER TO SAN LUIS OBISPO COUNTY COMMUNITY COLLEGE DISTRICT (CUESTA COLLEGE) SETTING A WATER RATE METHODOLOGY IIIII�IrIII�VIIIIIIIIJIi IUIII f MEETING DATE:
cityoSan Luis OBISpO July 6 , 1993
COUNCIL AGENDA REPORT ITEM NUMBER:
FROM: William Statler, Director of Finance
John Moss, Acting Director of Utilities ! '
Prepared by: Sue Baasch, Administrative Analyst 516
SUBJECT: AMENDMENT NO. 1 TO THE AGREEMENT FOR SALE OF WATER TO SAN
LUIS OBISPO COUNTY COMMUNITY COLLEGE DISTRICT (CUESTA
COLLEGE) SETTING A WATER RATE METHODOLOGY
CAO RECOMMENDATION
By motion, approve and authorize the Mayor to execute Amendment No. 1 to the
Agreement for Sale of Water to San Luis Obispo County Community College District
(Cuesta College) Setting a Water Rate Methodology.
DISCUSSION
i
In the May 1993 review of the Water Fund, staff explained that discussions were currently
underway with the San Luis Obispo County Community College District (Cuesta College) to tie the
District to the City's approved water rate structure. The result of the discussions is the proposed
Amendment No. 1 to the Agreement for Sale of Water to Cuesta. This amendment adopts a water
rate methodology for the sale of water to Cuesta that is identical to the approach in the rate
agreement recently approved with Cal Poly. The amendment to Cuesta's water sales agreement
is effective July 1, 1993, and phases in the rate increase over two years.
The intent of the amendment is to tie Cuesta College to the City's rate structure and periodic rate
reviews and adjustments, while reflecting Cuesta's unique differences from other utility customers.
Unlike other City water customers, Cuesta requires raw water only. Treatment and distribution
of Cuesta's water is performed by the California Men's Colony. Therefore, Cuesta should pay
water rates which reflect the cost to supply water only. These costs are identified in our financial
analysis (Schedule A of the Amendment) as source of supply costs.
In calculating the amount of the water rate that is attributable to source of supply costs, staff used
the same five year analysis of water fund revenue requirements as was used with Cal Poly. The
five year projection of revenue requirements for the City's water systems were divided into three
component parts: source of supply, treatment and distribution. Over the five year period beginning
July 1, 1993, source of supply represented 52% of the revenue requirement for the water fund.
This percentage is the applicable percentage of the total commercial water rate to be charged to
Cuesta.
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WmA COUNCIL AGENDA REPORT
Amendment No. 1 to Agreement for Sale of Water to Cuesta
Page 2
This analysis will be performed every five years for Cal Poly and Cuesta. Since the Cal Poly
agreement began last year, and the initial five year analysis used 92/93 revenue requirements, the
initial percentage of 52% for Cuesta will be in place for four years only to set Cuesta on the same
schedule as Cal Poly.
FISCAL EMPACT
Cuesta's current rate for water is $225 per acre foot. This rate has not changed since at least 1987.
The proposed rate structure would be:
Cost per ccf
Cuesta
Base Rate
Rate @52%
1-5 ccf $ 2.25 $1.17
More than 5 ccf 2.80 1.47
The following is a comparison of billings under the current versus proposed rate structure based
on use during 1992:
Current Structure
Usage Rate Proposed
1992 (ccf) Per ccf Pumping Total Structure
Jan-Mar 2,378 $ 1,229 $ 699 $ 1,928 $ 3,468
Apr-Jun 10,289 5,315 920 69234 15,018
Jul-Sept 15,433 7,972 2,952 10,924 22,528
Oct-Dec 11,360 5.868 3.597 9.465 16.581
TOTAL $209383 $89167 $28,550 $579595
The adjustment to 52% of the commercial rate structure will be phased over two years. Effective
July 1, 1993, Cuesta's percentage of the commercial rate structure will be 39%. The full 52% of
the rate structure will be effective July 1, 1994.
ATTACHMENT:
Amendment No. 1 to the Agreement for Sale of Water to San Luis Obispo County
Community College District (Cuesta College) Setting a Water Rate Methodology
AMENDMENT NO. 1 TO THE
AGREEMENT FOR SALE OF WATER TO
SAN LUIS OBISPO COUNTY COMMUNITY COLLEGE DISTRICT
(CUESTA COLLEGE)
SETTING A WATER RATE METHODOLOGY
THIS AGREEMENT, made this day of , 1993, by and between
the CITY OF SAN LUIS OBISPO, CALIFORNIA, a municipal corporation, hereinafter
called "City", and SAN LUIS OBISPO COUNTY COMMUNITY COLLEGE DISTRICT, a
political subdivision of the State of California, hereinafter called "District".
WITNESSETH:
WHEREAS, the City entered into an agreement for sale of water to the District
on June 16, 1987, and the agreement states that the District shall pay City at a fair
and equitable rate as established by City annually for water delivered.
WHEREAS, the City and District have agreed to amend that agreement by
adopting a methodology for setting the water rates that is consistent with the
methodology used for setting water rates for Cal Poly.
WHEREAS, the intent of this methodology is to recognize where the District is
different from other City water customers and where the District is similar, and to set
a structure that acknowledges these differences while adjusting automatically with
any water rate changes approved for all City water customers.
NOW, THEREFORE, in consideration of their mutual covenants, the parties
hereto agree as follows:
1 . RATE STRUCTURE METHODOLOGY
The District's rate structure for water shall be based on whatever the current rate is
for City commercial accounts as modified by a percentage ("ratio") that accounts for
only that part of the rate structure that is applicable to the District. This ratio shall
be established as outlined in paragraph 2, and reviewed every five years, except for
the initial period, which shall be for four years to put Cuesta on the same schedule as
has previously been adopted for Cal Poly.
2. SETTING A WATER RATE RATIO
The ratio to be applied to the commercial water rate structure shall be determined by
the City. The City shall prepare a prospective five year projection of the revenue
requirements for the City's water system. These revenue requirements shall be
divided appropriately according to operational, capital and debt service requirements
Amendment No. 1 - Setting a Rate Structure Methodology
Page 2
for three components: source of supply, treatment and distribution. The appropriate
percentage of total revenue requirements shall be assigned to each of the
components. The District's rate structure will be based on the revenue requirements
for the source of supply component only, as the City's obligation is to store, divert
and convey water to the point of delivery to the District.
Exhibit A sets forth this analysis for the period July 1 , 1992 through June 30, 1997,
and shall serve as an example for determining any changes to the ratio in subsequent
five year periods.
3. EFFECTIVE DATE FOR THIS RATE STRUCTURE
This rate structure shall be effective July 1, 1993. The City agrees that, due to the
significant financial impact, the District may implement this change by phasing in the
total increase over a two year period. By July 1, 1994, the District shall be paying
the full commercial rate for water times the applicable ratio.
WATER RATIO
TWO YEAR PHASING
Ratio to be applied against
City standard rates
for commercial accounts
July 1, 1993 39
July 1, 1994 52
4. NOTICE
The City shall provide the District with at least the same notice of proposed changes
in water rates as other City customers. All notices related to this agreement shall be
in writing and addressed as follows:
District Citv
Mike Hargett City Clerk
Vice President-Assistant Superintendent City of San Luis Obispo
Business Services P.O. Box 8100
San Luis Obispo Community College District San Luis Obispo, CA 93406
San Luis Obispo, CA 93403-8106
Amendment No. 1 - Setting a Rate Structure Methodology
Page 3
IN WITNESS WHEREOF, City and District have executed this AMENDMENT on
year and date first written above.
SAN LUIS OBISPO COUNTY CITY OF SAN LUIS OBISPO
COMMUNITY COLrDISTTBY \, � By
Michae L. xMayor Peg Pinard
Vice P esidenperintendent,
ATTEST: ess ervices APPROVED AS TO FORM:
Diane Gladwell, City Clerk of G. or nse City Attorney
Amendment No. 1 - Sehing a Rate Structure Methodology
Page 4
EXHIBIT A
DISTRICT'S APPLICABLE PERCENTAGE (RATIO)
OF APPROVED WATER RATE STRUCTURE
As required in Paragraph 2, the City has developed a five year revenue projection for
the water system. The components and applicable percentages of the total revenue
requirement for FY 92/93 through FY 96/97 is shown on Schedule A.
1. Applicable Component to the District
The District shall pay only the percentage cost related to Source of Supply. The
District shall not pay the percentage cost of those components related to Treatment
and Distribution as water is treated and distributed by another agency.
2. Applicable Water Rate Ratio for the period beginning July 1, 1993 and ending
June 30, 1997
The District shall pay the average of the five year percentage cost of Source of
Supply, or 52 percent of the city-wide commercial rate. The table below
summarizes the detail on Schedule A:
FIVE YEAR PERCENTAGE COST OF SOURCE OF SUPPLY
92/93 49 % ,
93/94 44 %
94/95 52 %
95/96 58 %
96/97 57 %
5 YR AVG 52 %
Amendment No. 1 - c 'Ing a Rate Structure Methodoloc-
Page 5
SCHEDULE A
APPLICABLE RATIO - CUESTA
SUMMARY OF WATER COST COMPONENTS FOR 1992-93
Source of Supply Treatment Distribution Total
Operations and Maintenance „$2°;727:;837: $954,513 $1,109,701 $4,792,051
Capital Outlay $0 $600,000 $600,000
Debt Service ' . .. ...........' `' > 26:92Q0:` $189,400 a $222,600 $681,200
TOTAL $1,143,913 $1,932,301 $6,073,251
PERCENT
«;..tivlatA lw.hn.v..:.,.:'..:n.::n:..:.v..n.v......v:..,.......x.nwn v :[C:S:Cv.:.Y.......v.v::........<....
19%
..32% 100%
:::::::::v::::
Pgcenc Apcable to: vesta>? r 4x.: 49%
�•. AM',a,vtll%T4:a gM4%.:6,W::( • a :..h i ...... : a a vw a•f ,an n .n v
i ,
hrtiFN.f�> x .. .n
SUMMARY OF WATER COST COMPONENTS FOR 1993-94
Source of Supply Treatment Distribution Total
Operations and Maintenance .
3I $1,316,140 $1,130,477 $5,431,310
Capital Outlay N
';:iii>>»:;<:::>;;':::SO>i $0 $500,000 $500,000
Debt Service $2fi9 20r > $952,900 $222,600 $1,444,700
TOTAL ;. ,.>,,n<:..:..::.....>:..::;'::.n:.::.;i
w $3,23,893.: $2,269,040 $1,853,077 $7,376,010
PERCENT r:::<::::>: ;<>::>;: < : ::::.: : . ;
.. .....:......'::;_::: =4,4a%a 31% 25% 100%
s $ e
P.W fk,p
n c8b[e iti 44o/a
c.. �Y o
.... ..... ......aw .:.w..na..S :h4 E ..:h" ' ::.'.:: ..„G,h
SUMMARY OF WATER COST COMPONENTS FOR 1994-95
Source of Supply Treatment Distribution Total
Operations and Maintenancex9;;6644789: $1,344,258 $1,154,629 $6,163,676
<'i:.::..... . i:....
Capital Outlay $0 $500,000
$500,000
Debt Service °.>:: <
<:><:<?*'' 20.. $952,900 $222,600 $2,044,700
TOTAL " "<_". >$33:889: ` $2,297,158 $1,877,229 $8,708,376
PERCENT ..... 26%"i52o 0
22% 100/o
:+:n,yk...n.....v....:....v>iX.y::n:m:fni>iY:::isp:if::>:.>y,.�..v.:v+nwryw,v.�:.•.!LnY::tl.n ...>l r:.:F.A.:v.
... n4f.:::n:.:.nfn.:'w .x v .n...v...,. .. �:::::::::n.::.�n�..::::..::::q.Y:F.':y.„v.iv'Fv:+e:v:+vf•:::.v:::n..,.::::::n.::y::::x: n
,:...:::.. .. .: n:'::f.YY:.::��:..v:nfJ:.:.::.:::.v.fi4Y:n.::....:. ...............�.i:fn•Y.ii::fw>::ff;:fn::.::.:..v::::::.w:::::n..v.v:::::::n..w::v.�::;:.::.:
' .. ::..>::::::..:.:.............................:......:.:.n...:::::::p.........v......................:.....:......::.v..vJ..n:..::::nY'Y::.::::::.:::::::::Y.i.:Ynb/++:•i�vi';::;fni>i:Jiii'.iiiii�.i'.ii'.>J::.::::.::.
r'
cab a to::OX,
Ar_.........:.. ..,.
SUMMARY OF WATER COST COMPONENTS FOR 1995-96
Source of Supply Treatment Distribution Total
Operations and Maintenance
's $4,822F612 $1,357,002 $1,165,575 $7,345,389
Capital Outlay $0 $500.000 $500,000
Debt Service $952,900
$222,600 $2,044,700
TOTAL4; <"+»:i.6'92<fl>.2:v.
__...,1:..:`` $2,309,902. $1,888,175 $9,890,089
PERCENT `<' 0 100%
�':.Oi..:ii:.;,+1.::•.:: :>'iiiiii::nK::S
:.,: ,;,v.,....7>Y„➢.'R,7,'i's;.;:.?:"F:$"::' S^:::n,"".'!:'' ::f>xn>'f^v>n>:ux.....
$?�'a 23/0 0
......,........ .
. .,........ rnr+.... . xn,....a>,,.M..,i... ,:.h•::•.aa
i.. . .. � ....,w,.:........,:..a...................�::::::.::.::...... ................:.....«:::.Yn,,,i„i,;;:,..:::.::.i:.�:.......... .... +x;�:.: ...z.:Y »>w4 >+::;,>,,,:.
.: p .. .... .h..::{... .................................. ................... .... ........:......:. ..........>.i..„v.:..>::.>}.>i:'.,';f'i'i`;•iY:^.>n.y'i::Yi::iSia..::n:::;.,.y:.::::::
PQr n. ....a.,.n :.a:..::.::i.:n:.:. .:....................:::::::.::.::.:.:::n<..:::.
:. ... .>....:..\.........:.::Y:. ..,:............................ .i:,:,in+%:n'.>'if.':::.�:.:::.Y::'......n .$ i');>;n
cab.. ..ia.C� S ::....a,... ...i...... . ....,. ....:...v....... :....f:af:.;.i
.. .... .h.v...... h.:. e. ......:............. nY'.....................:::.:......::::. x '::::�Y,p:.iii�..
::>:>:.<::589ra
.v.....n..vvxkv.v.4mv.x.w:hnv..w.Ox.nx.....w.:,vC:$x:nwvhv::,:.. ..... ................. v...•.,..... ........ nu:%.\` :....:::n ^: :i is%.::.:
'x:.f::x:>n......::::: Y::4i%.ii:Yiii:i:.w>Wi>i:�:iGA\.:viw.w.': .v::..........w:nx,:....x.....n.en.......::::.vv.:Y.vn......:: : :4»nvn4:::.+.
SUMMARY OF WATER COST COMPONENTS FOR 1996-97
Source of Supply Treatment Distribution Total
Operations and Maintenance °Y` :>>>
$4�98;9:771� $1,428,458 $1,226,951 $7,645,180
Capital Outlay $0 $500 000
$500,000
Debt Service $952,900 $222,600 $2,044,700
TOTAL `;;;::$5;858;977'='< $2,381,358 1
rJERCENT ......,:
$ ,949,551 $10,189,880
v:::x:xn_.. .
57.W 23% 19% 100%
;iilii:iiiiiii;n<'i:.>...i..::,.:. ....:.:........ ..........:i>:;:+Yi;::>;.::.Y:....,.......................... ......, :.::..:.....:................................... .
Percent,4ppt�cable 0:. uesta